The Global Wind Energy Council (GWEC) appreciates the recent decision by the Vietnamese government to approve an extension of the Feed-in Tariff (FIT) scheme for wind power in the country. However, the proposed reduction to the FIT risks damaging the growth of Vietnam’s promising wind power sector by slowing down investment, the creation of new jobs and difficulty for Vietnam to meet growing energy demand.
- The proposed FIT rates, in an official letter from the Ministry of Industry and Trade on 28 October 2020, will be 7.02 US cent/kWh for onshore wind and 8.47 US cent/kWh for intertidal/nearshore wind, and
- These will be applicable in projects which are scheduled from November 2021 to December 2023.
As per GWEC, this shows a tariff slash of around 17 percent for onshore wind which is a steep reduction in any wind power market globally to date.
The developers who are already facing delays due to COVID 19 also will face challenges in the wind market of struggle to close financing, leading to a “bust” period that could reduce new wind installations by up to 80 percent in 2023, and a further 25 percent per year thereafter. As per a market study, the FIT reduction of this size would derail investment in new and planned wind projects in Vietnam and threaten the country’s current position as a leading wind market in South East Asia.
The major impact of the reduced FIT will be seen in the employment rate as it will decrease and loss in inward investment. GWEC estimates that the slowdown would result in around 4 GW of total wind power installed capacity in Vietnam by 2025 – far below Vietnam’s potential and a likely drastic shortfall from government targets, given the MOIT already records 2.9 GW of projects with signed PPAs.
Ben Backwell, CEO of GWEC said that the wind industry is on the cusp of achieving economies of scale and cost reductions which will make Vietnam the leading wind market in Southeast Asia, but if the proposed FIT is implemented, it would jeopardise long-term development and ultimately result in higher energy prices at a time when the country’s energy demand is soaring. He emphasized the similar situation of Europe and America’s wind market which affected the market severely and so it is vital for the government of Vietnam to avoid creating a similar ‘boom and bust’ cycle so the country can benefit from the cost-competitive prices and socioeconomic benefits wind power can offer.
An installation rush was expected in 2021 ahead of the expiry of the current FIT, but prolonged delays mean much of the expected volume may spill over into 2022. GWEC has recommended a 6-month extension of current FIT levels to allow projects in the current pipeline to come online, followed by a milder FIT reduction for onshore and intertidal/nearshore wind projects commissioned from May 2022 onward.
Source : SAUR Energy